The
U.S. Tax Court in Steinberg v. Commissioner,
141 T.C. No.8 (2013) ruled that the value of a taxable gift can be reduced if
the donee pays the resulting estate tax if the donor dies in the three years of
making a gift. The donee will agree to pay the gift tax that is added to what
can be taxed in the estate.

In
the case, the individual who received the gift agreed by a signed writing to
pay any outstanding estate tax that stemmed from the gift if the donor died
within three years. The donor filed Form 709 claiming that the value of the
gift subtracted by an estimated amount of estate tax would arise if the donor
died within three years based on the "actuarial value of the donor's
survival." The court reasoned that a willing purchaser would want the
price lowered to compensate for the risk of becoming responsible to pay the
estate tax.